CIMB Daily Fixed Income Commentary - 30 Sep 2015

Market Roundup

• US Treasuries were boosted after a cautious early morning session of trading by the release of weaker than expected US house prices data. The morning session trading was under the cloud of scheduled Janet Yellen speech later this week (in which she is expected to reiterate the Fed’s view of rate hike this year) and Friday’s scheduled release of the Sep non-farm payrolls data.
• The MYR and IDR remained under pressure, seen around 4.4590 and 14685 respectively, this morning (though THB and SGD was firmer against the weaker USD) amid cautious sentiment ahead of Yellen’s speech and NFP data later this week, as well as sustained worries over China’s growth and the commodities slump (including troubles at commodities giant Glencore). We expect both MYR and IDR to remain pressured today with implied volatility still high at 17.0 (1M vol) and 13.2 respectively now.
• The Ringgit government bond market opened on weak footing but a firm 15-year MGS auction helped soothe sentiment, even as the Ringgit continued to be weak and Malaysia’s CDS under pressure on emerging market fears. On the other hand, Ringgit IRS rates rose, as swap players’ focus remained on the weak Ringgit.
• Thai government bonds closed mixed within a pretty tight range on Tuesday but longer term papers remained under pressure alongside the EM weakness and concerns ahead of anticipated firm US economic data and impending FOMC rate hikes. Weak THB around 36.453 continued to be a major driver for bonds though foreign investors were small net sellers of Bt618 million of Thai bonds during the day.
• Indonesia’s government bond yield curve rose on risk-off mode Tuesday, with foreign interbanks being net sellers in a thin market. The 10-year proxy was given at 9.80% in the morning session. However, the market rebounded after the bond auction result was announced, with the government issuing only IDR1.55 trillion out of IDR8.25 trillion incoming bids (downsized from initial target issuance of IDR 8 trillion).
• Asian credits had another bad day as risk-off sentiment continued. Amid the weaker stock markets in the region, spreads of Asian credits were widening as much as 30bps. On top of these, concerns over the Fed hike, continued weak currencies and commodity prices and releases of weak economic data (especially China’s decline in industrial sector profits) remained the major drags on credits.